Members-only big box retailer Costco Wholesale Corporation (COST) reports earnings after the closing bell on Wednesday, March 7, with the stock above a "golden cross" since Nov. 22, when it closed at $172.48. The stock is trading shy of my semiannual, monthly and weekly risky levels of $191.73, $192.92 and $193.31, respectively. Costco shares closed Tuesday, March 6, at $191.46, up 2.9% year to date and down 4.2% from the Jan. 29 high of $199.88. The stock is 8.9% above its Feb. 9 low of $175.79.
Analysts expect Costco to post earnings per share of $1.45 to $1.47 when it reports results on Wednesday. The stock had a positive reaction to its previous earnings report on Dec. 14, and shares traded higher on Dec. 15. Costco stock continued to move higher into 2018 but then suffered a correction. Zacks Equity Research thinks that Costco is poised for another earnings beat on favorable same-store sales. Growth in membership would also be a positive. (For more, see: Business Model Analysis: Costco vs. Sam's Club.)
The daily chart for Costco
Costco has been above a "golden cross" since Nov. 22, when the stock closed at $172.48. A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average, indicating that higher prices lie ahead. Strength continued as 2018 began, with the stock trading as high as $199.88 on Jan. 29. From this high, the stock suffered a 12% correction to its 2018 low of $175.79 set on Feb. 9. The horizontal lines show the stock well above my quarterly value level of $169.33. The stock is just below my semiannual, monthly and weekly pivots of $191.73, $192.92 and $193.31, respectively. My annual risky level is above the chart at $202.84.
The weekly chart for Costco
The weekly chart for Costco is neutral, with the stock above its five-week modified moving average of $189.19. The stock is well above its 200-week simple moving average of $147.86, which is the "reversion to the mean." The 12 x 3 x 3 weekly slow stochastic reading is projected to decline to 63.20 this week, down from 65.64 on March 2.
Given these charts and analysis, investors should buy Costco shares on weakness to the 200-day simple moving average at $171.45 and rising each day, and I recommend reducing holdings on strength to my annual risky level of $202.84. (For additional reading, check out: How Costco's Stock Can Soar on E-Commerce.)